Correlation Between CME and Industrias Bachoco

Can any of the company-specific risk be diversified away by investing in both CME and Industrias Bachoco at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CME and Industrias Bachoco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CME Group and Industrias Bachoco SAB, you can compare the effects of market volatilities on CME and Industrias Bachoco and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CME with a short position of Industrias Bachoco. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Industrias Bachoco.

Diversification Opportunities for CME and Industrias Bachoco

0.0

Correlation Coefficient

CME  Industrias Bachoco

Pay attention - limited upside

The 3 months correlation between CME and Industrias is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Industrias Bachoco SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Bachoco SAB and CME is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CME Group are associated (or correlated) with Industrias Bachoco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Bachoco SAB has no effect on the direction of CME i.e., CME and Industrias Bachoco go up and down completely randomly.

Pair Corralation between CME and Industrias Bachoco

If you would invest  20,570  in CME Group on January 26, 2024 and sell it today you would earn a total of  689.00  from holding CME Group or generate 3.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

CME Group  vs.  Industrias Bachoco SAB

CME Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, CME is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Industrias Bachoco SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrias Bachoco SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Industrias Bachoco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CME and Industrias Bachoco

The main advantage of trading using opposite CME and Industrias Bachoco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, Industrias Bachoco can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Industrias Bachoco will offset losses from the drop in Industrias Bachoco's long position.

The idea behind CME Group and Industrias Bachoco SAB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.